ST.

MOTHER THERESA ENGINEERING COLLEGE

DEPARTMENT OF MECHANICAL ENGINEERING
LESSON PLAN
MG81 ENGINEERING ECONOMICS AND COST ANALYSIS

Course Objective: To learn about the basics of economics and cost analysis related to engineering so
as to take economically sound decisions.
To learn about the introduction to economics and elements of costs.
To learn about value Engineering and Time Value of Money.
To learn about the different Project appraisal methods
To learn about the replacement and maintenance models.
To learn about the different methods of depreciation models.

Session Topics to be covered Time Books

No Allocation Referred

UNIT I: INTRODUCTION TO ECONOMICS

1. Introduction to Economics- Flow in an economy. 50 mts
2. Law of supply and demand 50 mts
3. Concept of Engineering Economics 50 mts
4. Engineering efficiency, Economic efficiency, Scope of 50 mts
engineering economics

5. Element of costs, Marginal cost, Marginal Revenue, Sunk 50 mts

cost, Opportunity cost, TB 1

6. Break-even analysis- P/V ratio, 50 mts

7. Elementary economic Analysis. Material selection for 50 mts
product Design, selection for a product,

8. Process planning 50 mts

UNIT II: VALUE ENGINEERING
10. Make or buy decision. - Value engineering 50 mts
11. Value engineering - Function, aims, Value engineering 50 mts
procedure.

12. Interest formulae and their applications. Time value of 50 mts

money

13. Single payment compound amount factor, Single payment 50 mts

present worth factor, TB 1/
14. Equal payment series sinking fund factor 50 mts Ref - 3
15. Equal payment series payment Present worth factor 50 mts
16. Equal payment series capital recovery factor 50 mts
17. Uniform gradient series annual equivalent factor 50 mts
18. Effective interest rate, Examples in all the methods. 50 mts

Session Topics to be covered Time Books

 No Allocation Referred
UNIT: III CASH FLOW
20. Methods of comparison of alternatives. 50 mts
21. Present worth method (Revenue dominated cash flow 50 mts
diagram).
22. Future worth method (Revenue dominated cash flow 50 mts
23. diagram, cost dominated cash flow diagram), 50 mts TB 1/
24. Annual equivalent method (Revenue dominated cash 50 mts Ref - 3
25. flow diagram, cost dominated cash flow diagram). 50 mts
26. Rate of return method 50 mts
27. Examples in all the methods. 50 mts
UNIT: IV REPLACEMENT AND MAINTENANCE ANALYSIS
29. Replacement and Maintenance analysis. Types of 50 mts
maintenance.
30. Types of replacement problem. 50 mts
31. Determination of economic life of an asset, 50 mts
32. Replacement of an asset with a new asset. 50 mts TB 1/
33. Types of maintenance capital recovery with return and 50 mts Ref - 3
34. Concept of challenger and defender. 50 mts
35. Simple probabilistic model for items which fail 50 mts
36. Completely. 50 mts
UNIT: V DEPRECIATION
38. Depreciation- Introduction, Causes of Depreciation 50 mts
39. Straight line method of depreciation, declining balance 50 mts
method of depreciation
40. Sum of the years digits method of depreciation, sinking 50 mts
fund method of depreciation/ Annuity method of
Depreciation,
41. Service output method of depreciation 50 mts TB 1
42. Evaluation of public alternatives- introduction, 50 mts
Examples
43. Inflation adjusted decisions - procedure to adjust 50 mts
inflation.
Examples on comparison of alternatives and 50 mts
44. determination of economic life of asset.

TEXT BOOKS
1. Panneer Selvam, R, Engineering Economics., Prentice Hall of India Ltd, New Delhi, 2001.

REFERENCES
1. Chan S.Park, Contemporary Engineering Economics., Prentice Hall of India, 2002.
2. Donald.G. Newman, Jerome.P.Lavelle, Engineering Economics and analysis. Engg. Press,
Texas, 2002
3. Degarmo, E.P., Sullivan, W.G and Canada, J.R, Engineering Economy., Macmillan, New York,
1984
4. Grant.E.L, Ireson.W.G., and Leavenworth, R.S, .Principles of Engineering Economy., Ronald
Press, New York, 1976.
5. Smith, G.W., Engineering Economy, Lowa State Press, Iowa, 1973.

Staff Incharge HOD PRINCIPAL